Horace Mann CEO says company is healthy

Friday

Oct 31, 2008 at 12:01 AMOct 31, 2008 at 4:27 PM

Horace Mann Educators Corp. president and CEO Louis Lower II remained upbeat about the insurer’s liquidity, investments and future prospects in a conference call with analysts Thursday despite a $30.8 million loss for the third quarter.

Chris Dettro

Horace Mann Educators Corp. president and CEO Louis Lower II remained upbeat about the insurer’s liquidity, investments and future prospects in a conference call with analysts Thursday despite a $30.8 million loss for the third quarter.

“We have reassured ourselves we do not have fundamental credit-quality issues,” Lower said.
Horace Mann said Wednesday it lost $30.8 million in the three-month period ended Sept. 30, mostly through $45 million in pretax investment losses and damage claims from 11 catastrophic events, including two Gulf Coast hurricanes.

The Springfield-based company estimated pre-tax catastrophic losses of $36.2 million for the period, including $13 million from Hurricane Gustav and $12 million from Hurricane Ike.
Earnings in other operations somewhat offset those losses.

Lower said catastrophic losses were at the midpoint of the range the company had pre-announced, while investment losses were somewhat less than expected.

He said the third quarter was the third-worst quarter for catastrophes in the company’s history, “coming on the heels of the worst second quarter for catastrophes.”

“Our realized losses were largely from the third-quarter headlines credit” of Lehman Brothers, Fannie Mae and Freddie Mac and AIG (American International Group),” he said.

“The meaningful increase in our unrealized positions is predominantly a result of the extreme and unprecedented widening of corporate bond spreads that almost exclusively reflects a remarkably disruptive credit market.”

“We believe that as the worldwide coordinated rescue efforts take hold, they should unclog the credit markets, restore rationality, reduce spreads and moderate our unrealized positions,” he said.

An Oct. 8 decision by the company to draw down $75 million from a $125 million bank-credit facility to assure capital levels of insurance subsidiaries originally was misinterpreted by some.

“Our concern was never about Horace Mann liquidity,” Lower said. “It was about liquidity available in the financial markets.”

Horace Mann has not yet found it necessary to use the $75 million.

Lower said Horace Mann would have no refinancing needs for several years and only “very modest needs at that time.”

He added that Horace Mann’s investment portfolio has an “insignificant” exposure to subprime mortgages, has no auto manufacturers or homebuilders, and that the company hasn’t participated in any credit swaps.

A year ago, Horace Mann made $18.4 million for the period. Losses through the first nine months of this year totaled $12 million compared to net income of $64.8 million for the same period of 2007.

Chris Dettro can be reached at (217) 788-1510 or chris.dettro@sj-r.com.